McDonald's quits Crimea as fears of trade clash grow

Employees remove a trash can outside a McDonald`s restaurant, which was earlier closed for clients, in the Crimean city of Simferopol
Reuters

McDonald's Corp said on Friday it had closed its restaurants in Crimea, prompting fears of a backlash as a prominent Moscow politician called for all of the U.S. fast food chain's outlets in Russia to be shut.

Crimea's annexation by Russia, which Ukraine and the West do not acknowledge, has worried companies with assets in the Black Sea peninsula as it is unclear how the change may affect their business.

McDonald's said the decision was strictly based on business and had "nothing to do with politics." Nevertheless, its move to temporarily close restaurants in Simferopol, Sevastopol and Yalta is likely to be seen as emblematic of the rift in Western-Russian relations, now at their lowest point since the end of the Cold War.

"Like many other multi-national companies, McDonald's is currently evaluating potential business and regulatory implications which may result from the evolving situation in Crimea," McDonald's said in a statement.

"Due to the suspension of necessary financial and banking services, we have no option but to close our three restaurants in Crimea."

The Crimean outlets are not franchises, but owned and operated by McDonald's itself.

The closures follow Geneva-based Universal Postal Deutsche Post's announcement that it was no longer accepting letters bound for Crimea as delivery to the region was no longer guaranteed.

Economic relations between Russia and Ukraine have worsened since Russia annexed Crimea last month in response to the ouster of Russian-backed president Viktor Yanukovich after months of street protests in Kiev.

Targeted sanctions imposed on a number of prominent Russians by the United States and the European Union have alarmed some foreign investors.

Russia raised the price it charges Ukraine for gas on Thursday for the second time this week, almost doubling it in three days by cancelling previous discounts. While that may hurt Russian sellers, it piles pressure on a Ukraine teetering on the brink of bankruptcy.

Moscow has often used energy as a political weapon in dealing with its neighbours, and European customers are now concerned Russia might again cut off deliveries.

The Ukrainian government said it was looking at alternatives including buying gas from western neighbours, an option that would mean reversing flows in transcontinental pipelines.

ECONOMIC PRESSURE

Moscow is applying economic pressure in other areas.

Russian riot police last month took control of a factory belonging to a Ukrainian confectionery magnate in the city of Lipetsk as part of an investigation into the company's affairs, the Ukrainian government has said.

Petro Poroshenko, a billionaire oligarch known as the "Chocolate King", is the front-runner in Ukraine's presidential election, which has been set for May 25.

Ukraine this week temporarily banned seven Russian food companies from selling some of their products on Ukrainian territory.

McDonald's said it would help relocate staff to work in mainland Ukraine, signalling it did not expect its Crimean businesses to reopen in the near future.

The deputy speaker of the Russian parliament, Vladimir Zhirinovsky, known for his anti-Western rhetoric, demanded that McDonald's entirely pull its business out of Russia.

"It would be good if they closed here too ... if they disappeared for good. Pepsi-Cola would be next," Russian media quoted Zhirinovsky as saying.

Zhirinovsky, whose nationalist Liberal Democratic party largely backs President Vladimir Putin in parliament, said the party would organise pickets at McDonald's restaurants across the country.

McDonald's, which operates more than 400 restaurants in Russia, was the first international fast-food chain to tap the Russian market when it opened in Moscow's Pushkin Square before the collapse of the Soviet Union. That branch had the highest sales and served the most customers of any McDonald's outlet in 2012.

A Russian backlash against McDonald's products would have a significant impact on company profits. McDonald's sees Russia as one of its top seven major markets outside the United States and Canada, according to its 2013 annual report.

Russian moves to shun McDonald's could backfire, according to Russian newswire RBK, which has pointed to Russian food suppliers to McDonald's that would suffer as a result.